by Jared Levy on June 16, 2010
It’s the broken record that we traders love to play again and again. While the process is the same, the outcome is almost always different. Earnings season is often a catalyst for change in a stock’s direction, volatility, and even sentiment. It can also simply accelerate a trajectory or cause a stock to do nothing at all, but regardless, just about every investor needs to be hyper-aware of earnings dates, especially the ones that involve your stocks or their peers.
Alcoa (NYSE:AA) is the supposed grand marshal of this quarterly parade, but even though there are some stocks that will report sooner, the aluminum giant’s reporting date should be noted, as the weeks following Alcoa’s report is when the bulk of S&P 500 companies report.
Sectors and their leading stocks tend to report in clumps within a short time frame of one to three days. So if you know a large retailer is reporting, chances are that a comparable peer’s report is not far away. Peers can obviously have an effect on each other’s stock price and more often than not, a negative report by one stock in a sector will have a negative effect on the others and vice-versa. Some traders call this phenomenon “falling in sympathy.”
As an options trader, there are pros and cons to this heightened awareness and potential volatility. It really depends on your positions going into an earnings report and the type of strategies you plan to employ.